Because the loan is backed by an asset, the lender takes on less risk. As a result, secured car loans often come with lower interest rates, higher borrowing limits and more competitive loan terms. They are a common option for both consumer car loans and commercial car loans, especially when the vehicle meets lender requirements.

An unsecured car loan does not use the vehicle as security. Instead, the lender assesses the application based on factors such as your income, credit history, employment or business stability, and ability to repay the loan. For ABN holders, this may also include trading history and business financial position.

Because there is no asset securing the loan, unsecured finance generally presents more risk to the lender. This means unsecured car loans can come with higher rates and lower borrowing limits compared with secured options.

Another key difference is flexibility. Secured loans often have conditions around the type, age and condition of the vehicle. Unsecured loans can sometimes be more suitable for older vehicles, private sales or cars that fall outside standard secured lending criteria.

Both secured and unsecured loans allow borrowers to spread the cost of a vehicle over time through regular repayments, with terms commonly ranging from one to seven years.

In simple terms, secured car loans can offer lower rates and stronger borrowing power, while unsecured car loans may provide more flexibility. The right option depends on whether you are buying a vehicle for personal use or business use, the type of car you are purchasing, and what best suits your financial situation.